The First Quarter - Insights for Young Grads into their First 90 Days on the Job
Congrats to Chris Martine, Lehigh ISE '10 '11G!

Pricing of Gilead Sciences drug Sovaldi

Last week the United States Senate Committee on Finance published the results of an 18-month investigation into Gilead Sciences's Hepatitis C drug Sovaldi and its second-wave successor Harvoni. It found that "[the] pricing and marketing strategy was designed to maximize revenue with little concern for access or affordability." Sovaldi cost $84,000 for a single course of treatment and Harvoni $94,500.

This is significant because "Medicare spent more on Gilead Hepatitis C Drugs in the first half of 2015 than in all of 2014". In addition, Medicaid programs spent more than $1 billion to treat less than 2.4 percent of enrolled patients with Hepatitis C with Sovaldi (because patients first try other drugs and Sovaldi only after the other ones fail).

Highlights include:

  • "In 2014 alone, Medicare and Medicaid combined to spend more than $5 billion on Sovaldi and Harvoni before rebates. That total is projected to climb in 2015."
  • "Gilead’s recent financial statements show U.S. sales of Sovaldi and Harvoni, including through public programs and private payers, totaled $20.6 billion after rebates in the 21 months following Sovaldi’s introduction."
  • Senate Finance Committee Ranking Member Ron Wyden, D-Ore., is quoted as saying: “Gilead pursued a calculated scheme for pricing and marketing its Hepatitis C drug based on one primary goal, maximizing revenue, regardless of the human consequences. There was no concrete evidence in emails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug’s first developer, factored into how Gilead set the price. Gilead knew these prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid, but still the company went ahead.
  • "Gilead set a high price for Sovaldi with an eye toward ensuring a future high price for Harvoni." In addition, "by elevating the price for the new standard of care set by Sovaldi, Gilead intended to raise the price floor for all future Hepatitis C treatments, including its follow-on drugs and those of its competitors."
  • "Gilead underestimated the degree of access restrictions that it expected would result from its pricing decision."
  • While prices decreased after competitors entered the market, concerns remain. "Even as competition lowered prices for therapies, this report documents that concerns remain, particularly in the public payer community, about high costs for treating millions of people in the U.S. infected with Hepatitis C, as well as the budgetary effects of a future single source innovator that might not face competition as quickly."
  • The executive summary further mentions that: "while Sovaldi has significantly improved cure rates for the most common variety of Hepatitis C, genotype 1, for other genotypes, rates were lower and required much longer treatment, at a wholesale price as high as $168,000. Gilead did not take meaningful steps to price or discount its drugs to help those individuals." 

You can read the executive summary of the report here and the full report there.

The report also mentions that "Gilead acquired its sofosbuvir-based drugs through the multi-billion dollar acquisition of Pharmasset, Inc. in 2012, and spent hundreds of millions of dollars more completing clinical trials and FDA approvals." Specifically, it bet $11 billion in a "huge and risky bet" (Reuters). So we are also seeing a company that attempts to reward itself for the real financial risk it took back in 2011.

But the Reuters article also states: "Analysts questioned whether the deal price -- equal to more than one-third of Gilead's market value -- was too steep. A Wall Street survey... found that 82 percent thought Gilead paid too much." So perhaps the high price public payers have to pay now follows from the steep acquisition price Gilead agreed to. In fact the founder of Pharmasset stated at the time of the deal that "They could have had the company for $300 million or less in 2004." Maybe public payers shouldn't have to pay for Gilead's mistakes.

While pharmaceutical companies like to justify high drug prices as a way to recoup the R&D costs of drugs that failed and overall as the price people have to pay to maintain a healthy innovation ecosystem, it is sometimes difficult to determine where the price for innovation ends and the price for greed begins.


The comments to this entry are closed.